MELBOURNE – Glencore could leap into top market indices within six months of listing in Australia as fund managers' copper appetite may outweigh concerns over thermal coal exposure, analysts and investors said following briefings on the listing.

Glencore, the world's largest thermal coal exporter, plans a secondary listing on the Australian Securities Exchange in October, aiming to tap one of the world's fastest-growing pools of institutional capital to fund its copper growth ambitions and potentially open the way for large-scale M&A.

Brokers including JPMorgan, Barrenjoey and UBS held investor briefings this month on Glencore's proposed listing, its business and index implications, in sessions described by participants as well attended.

JPMorgan and UBS declined to comment, while Barrenjoey did not return a request for comment.

Glencore CEO Gary Nagle has said he believes the $88-billion company can achieve inclusion in Australia's benchmark S&P/ASX 200 index within 12 months, requiring the CDIs to achieve a market value of A$1.5-billion ($1.06-billion). To qualify for the larger S&P/ASX 100 index, its ASX-traded shares would need to have a market value of at least A$5.5-billion.

Analysts see momentum behind the stock potentially propelling it into the top-100 index much sooner.

"Anecdotally, I think everyone's keen to understand who Glencore is and what the offering is going to be," said Glyn Lawcock, an analyst at Barrenjoey in Sydney.

"Because once it gets here, if it can get the liquidity and the market cap size that it needs, it could be in the ASX 100 by as early as March, April next year. And once it gets into the 100 then it'll have to be taken seriously by all the investors in Australia that use that as their benchmark," he said.

Australian investors have become increasingly comfortable with secondary listings through CHESS Depositary Interests (CDIs).

There are now 37 metals and mining companies' CDIs on the ASX, up from 22 in early 2020, ASX data shows, while trading activity has also accelerated sharply, suggesting Glencore may well find the liquidity it needs.

A handful of global companies drive the liquidity, led by Newmont, Alcoa and Capstone Copper. Turnover in Newmont alone was around A$9-billion.

Glencore is attractive as about 30% of its profit comes from copper, which is in strong demand to meet electrification and AI needs. The metal could make up 50% of the miner's earnings by 2030 if it develops its assets on schedule, analysts estimate.

"Another investment opportunity would be welcome," said Andy Forster, senior investment officer at Argo Investments.

COAL HURDLE
Copper growth prospects could outweigh any concerns about coal in Glencore's portfolio, with Forster pointing to what he called a general softening in emphasis by funds on environmental concerns.

Still, there could be some resistance to a company reliant on thermal coal for around 15% of its underlying industrial earnings.

The view that funds that screen for environmental, social and governance (ESG) issues have collapsed amid a US shift away from climate action is not entirely accurate, according to the Responsible Investment Association Australasia (RIAA).

RIAA has verified Australian funds under management that exclude coal investments grew 14% to A$37.9-billion last year.

That could rise further in the years ahead, as institutional wealth transfers to younger generations, RIAA Co-CEO Estelle Parker said.

Australia’s Productivity Commission in 2021 estimated that around A$3.5 trillion of assets would be transferred from the baby boomers by 2050.

Younger members "are asking more questions about where their investments are invested, and screening out fossil fuels is a popular screen at the consumer level," Parker said.

"So funds are seeking to meet that demand, and so therefore we are seeing quite a number of funds on the market now screening out fossil fuels."